Housing Wealth and Personal Consumption
One of the main reasons that the real estate market could levitate at these price points is the monumental wealth transfer between baby boomers and their kids. A major tax advantage is closing out at the end of 2025, and those with a healthy portfolio will be letting it flow – another opinion on it here:
Unless Congress acts, on Jan. 1, 2026, the estate, gift and generation-skipping transfer (GST) tax exemption amounts will be cut in half. A decrease in the exemption amount could result in significant additional transfer taxes for families with federally taxable estates. However, there is still ample opportunity for high-net-worth families to plan to utilize the current exemption amounts. This article will explore potential wealth transfer opportunities to capture and utilize the exemption amount before it may be lost.
In 2017, the Tax Cuts and Jobs Act (TCJA) doubled the existing estate and gift tax exemption amounts from $5.6 million per person (or $11.18 million per married couple) to $11.18 million per person (or $22.36 million per married couple), indexed for inflation annually. In 2023, the estate and gift tax exemption amount is $12.92 million per person (or $25.84 million per married couple).
The TCJA is set to expire at the end of 2025. Let’s assume that the estate and gift tax exemption amount has increased to $14 million by this time (due to adjustments for inflation). In that case, if Congress does not act, the exemption amount would decrease to about $7 million per person or $14 million per married couple. This loss in exemption amount could increase overall transfer taxes for certain families by millions of dollars.
We’ve been in a similar position in prior years and have seen that congressional gridlock can make reaching an agreement on preserving or increasing the exemption extremely difficult. While it is uncertain what, if any, tax-related legislation will come out of Congress in 2024 and…